Big 3 Bailout Becomes Bush Bailout

The Big 3 Bailout became the Bush Bailout of the Big 3 automakers Friday, December 19, as president George W. Bush agreed to loan the failing automakers as much as $17.4 billion through February 2009. General Motors and Chrysler will receive $13.4 billion with $4 billion being held until February and doled out only if needed.

"These are not ordinary circumstances. In the midst of a financial crisis and a recession, allowing the auto industry to collapse is not a responsible course of action." President Bush's words of relief for the Big 3 automakers sent a wave of relief through Detroit.

Rick Wagoner, CEO of General Motors, thanked the Bush administration in a public statement. Chrysler, however, issued a statement thanking the president minutes after president Bush announced at a press conference that he was extending a loan to General Motors and Chrysler - with provisions. Ford also acknowledged president Bush's decision, although Ford company executives believe Ford is strong enough to withstand the downturn in the economy for a few more months and are not participating in the bailout.

By March of 2009, the automakers must show that they are in the process of restructuring, that they have wage concessions from autoworkers that will be implemented by December, and executive bonuses must be frozen. The government has the right to veto any automaker expenditure above $100 million. If those conditions are not met, the government retains the right to collect on the loans. If the conditions are met, the government can extend the loans, allocate additional loans, or collect on the loans - whatever may seem appropriate by the conditions presented. However, it is hoped that no other loans will be necessary and that the beleaguered automakers will be able to turn their companies around, then somehow begin making good on the loans.

But that is considered by many to be unrealistically optimistic, especially in three months.

Where did the president get the money? From the funds that he and Secretary of the Treasury Henry Paulson defended as being set aside only for banks and financial institutions. Previously opposed to using the TARP (Troubled Asset Relief Program) funds for anything other than the bailout or bolstering of financial institutions, the president felt it necessary to use part of the $700 billion bailout money in the end rather than pulling the money from some other area, precipitating a budget cut.

As for the somewhat popular notion of allowing the automakers to file Chapter 11 bankruptcy, president Bush said that that option was "unlikely to work for American automakers at this time." Although the president was not specific about what would happen when or if the automakers could not meet the requirements of the loans, it is believed that the president is favorable to allowing the Big 3 automakers to file for restructuring bankruptcy.

It is believed that the president actually reconsidered his stance under the pressure of possibly having one more blemish on his already tarnished legacy should one or more of the Big 3 automakers fail. It is certain that the Senate forced his hand when they refused to vote for a bailout last week. But it was Bush himself who said that the auto industry would surely collapse if the executive branch did not step in.

At the press conference, the president also said he did not want to place a heavier burden of job losses and failed companies in an otherwise downspiraling economy on the incoming president. And that could be true as well. But having the industry that has been looked upon as a cornerstone of the American economy for so many years collapse at the end of his presidency was a telling mark he apparently did not want on his record.

The latest Gallup Poll (November) places president Bush's job approval rating of 28%, his disapproval rating at 68%.

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Sources:

MiamiHerald.com

MontrealGazette.com

Gallup.com